Is Spongebob plan right for me?

Discussion in 'Insolvency' started by Dubya, Sep 30, 2019.

  1. Dubya

    Dubya UKBF Newcomer Free Member

    14 1
    Depressed newbie here, please be gentle : )
    I have a Ltd Company for IT contracting but have been out of work since June 2018 and am about to hit the buffers personally. I looked for help today and was advised to google Spongebob Plan, so here I am. I have read everything I can find on these forums and it feels like SB plan may be perfect for me.
    I have:
    No cash in the business account
    5.8k Directors Loan Account overdrawn (HMRC know about this as we filed my 2018 accounts a few weeks ago and my accountant obviously included it in the accounts.
    No creditors except HMRC
    CT of £6k is due tomorrow (1/10/2019)
    £375 owed in VAT
    Assets are limted to my Laptop, a monitor and some IT peripherals (likely total circa £1500-2000)
    Company is effectively 'dormant' although my accountant has dragged their feet and still haven't produced my dormancy accounts.
    I haven't invoiced anyone since June 2018 so I effectively stopped trading then.

    I don't have any money personally and I am just about surviving on some rental income from a buy-to-let flat I bought a few years ago when the going was good. I am selling my main residence to pay off personal debt, downsize into the BTL flat and get all the monkeys off my back. Neither my company or I can afford to pay the CT.
    Any advice would be very gratefully received.
    Many thanks.
     
    Last edited: Sep 30, 2019
    Posted: Sep 30, 2019 By: Dubya Member since: Sep 30, 2019
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

    21,996 2,586
    The company has assets to cover the debt, just you cannot pay the major asset (the directors loan account).

    You can try the spongebob plan, expect HMRC to object (they usually do when they are owed money). Eventually companies house ignore objections and allow the company to be dissolved.
    In the meantime expect HMRC to keep chasing the company for payment.

    Your directors loan account will be untaxed income to be entered on your personal tax return.
     
    Posted: Sep 30, 2019 By: Mr D Member since: Feb 12, 2017
    #2
  3. Dubya

    Dubya UKBF Newcomer Free Member

    14 1
    Thanks Mr D. Did you read 1500 as 15000? My tangible assets (essentially a laptop and monitor) are worth perhaps 1500-2000 so they won't cover the CT debt. To be honest I'm rather hoping to keep them both as they are essential to my living and looking for work. I understand that any outstanding Directors Loan Account must be included in my next Self Assessment Return.
    One bit I'm struggling with is do I tell my accountants what I am doing? I don't owe them any money but they do want over £200 to close the company (which I don't have) and I am guessing that they will do everything by the book therefore negating the SB plan?
    Do I just follow the SB Plan, keep it quiet from my accountants and only inform my creditors? The company only owes money to HMRC in the form of 375 VAT and circa 6k CT. DO I send the SB Plan letter to creditors to HMRC?
    Many, many thanks for any advice. My CT is due today and I have lost two stone in the past three months worrying. I spoke to a helpline yesterday and they recommended SB Plan.
     
    Posted: Oct 1, 2019 By: Dubya Member since: Sep 30, 2019
    #3
  4. Mr D

    Mr D UKBF Legend Free Member

    21,996 2,586
    No I read that as you typed it. The directors loan account is the major company asset but you already said you cannot pay that.
    The other company assets - they belong to the company so you would have to buy them. Or request that Crown Solicitor disclaim them once company is dissolved (process can take a few months). Assets of the company transfer to the Crown when company dissolves.

    £200 for doing what you can do with spongebob plan? Think that's a bit much.

    SB plan is also doing things by the book. Notifying creditors, asking them to wind business up.
     
    Posted: Oct 1, 2019 By: Mr D Member since: Feb 12, 2017
    #4
  5. Dubya

    Dubya UKBF Newcomer Free Member

    14 1
    Thanks Mr D, I understand that now. Now for a stupid question; who are my creditors? As stated the company only owes VAT & CT to HMRC. My accountants will no doubt want something from me so are they a creditor? I was just an IT contractor, office bod, no suppliers or stock or anything like that.
     
    Posted: Oct 1, 2019 By: Dubya Member since: Sep 30, 2019
    #5
  6. Mr D

    Mr D UKBF Legend Free Member

    21,996 2,586
    In your case, 2 offices of HMRC.
    Until your accountant tells you that the company owe them money they are not a creditor.
     
    Posted: Oct 1, 2019 By: Mr D Member since: Feb 12, 2017
    #6
  7. Dubya

    Dubya UKBF Newcomer Free Member

    14 1
    So..one letter to VAT and one to CT? I'm so dense I thought the whole point was not to tell HMRC and just let Co House strike off then ignore HMRC demands for payment. Maybe SB Plan guide needs to be updated to specifically mention HMRC as creditors so thicko's like me understand from the off. Many thanks again for your help : )
     
    Posted: Oct 1, 2019 By: Dubya Member since: Sep 30, 2019
    #7
  8. MikeJ

    MikeJ UKBF Big Shot Free Member

    5,770 1,673
    Have you been taking salary payments since the last invoice you raised?
     
    Posted: Oct 1, 2019 By: MikeJ Member since: Jan 15, 2008
    #8
  9. Dubya

    Dubya UKBF Newcomer Free Member

    14 1
    The DS01 form states 'You must send copies of this application to all notifiable parties e.g. creditors, employees, shareholders..' So I have to send DS01 to HMRC too?
     
    Posted: Oct 1, 2019 By: Dubya Member since: Sep 30, 2019
    #9
  10. Dubya

    Dubya UKBF Newcomer Free Member

    14 1
    Hi Mike - Probably some, I'd need to check. Last invoice was in June 2018 and I have really only taken dividends since then. To be honest I never took the salary anyway as the online accounting software told me what I could and could not take. e.g the 'Pay Yourself' section was all I looked at. What impact either way might it have?
     
    Posted: Oct 1, 2019 By: Dubya Member since: Sep 30, 2019
    #10
  11. Dubya

    Dubya UKBF Newcomer Free Member

    14 1
    A few of my stupid questions are actually answered on the CH guidance notes for the DS01. I should have read that first, sorry for my newness. It appears I am too new to post a link here (you need to have 30 posts before you can do that)
     
    Posted: Oct 1, 2019 By: Dubya Member since: Sep 30, 2019
    #11
  12. kulture

    kulture UKBF Legend Staff Member

    8,088 2,229
    Your questions were not stupid. I have seen a lot worse here. Do the spongebob plan. Declare your Directors loan as income and pay the tax on it. Sit back and see what happens.

    Respond to all debt collectors by saying that the company is in the process of being dissolved. Eventually one of two things will happen. Either the company gets dissolved or HMRC winds it up. If the former then its all over, if the latter then you will have a long chat with the Official Receiver who may agree some kind of payment plan. For the sums involved it is likely that it will just get dissolved.

    The IT equipment is probably worth a lot less than you suggest. Such things tend to sell for a fraction of what they are worth to you. See if you can get a realistic valuation from a third party and then buy them from the company at that valuation.
     
    Posted: Oct 1, 2019 By: kulture Member since: Aug 11, 2007
    #12
  13. SteLacca

    SteLacca UKBF Ace Free Member

    1,703 347
    This may be a concern. I assume your accounts were made up to 31 December 2019. Even if the company was solvent then, there's a strong possibility that it became insolvent as a result of dividends taken. Your DLA was established at the accounts year end, and you may find that you now have unlawful dividends on top of that.
     
    Posted: Oct 1, 2019 By: SteLacca Member since: Jun 16, 2016
    #13
  14. Dubya

    Dubya UKBF Newcomer Free Member

    14 1
    No, my accounting year end is 31st December, so the accounts submitted a few weeks ago were made up to 31/12/2018. I have checked and seen that my payroll runs became NIL from February 2019. Even though the payroll was running until then I didn't move any money out of company account for that purpose. The last Director Withdrawal was August 2018, two months after my last invoice. I'm sorry, that probably doesn't answer your question? Thank you for responding : )
     
    Posted: Oct 1, 2019 By: Dubya Member since: Sep 30, 2019
    #14
  15. SteLacca

    SteLacca UKBF Ace Free Member

    1,703 347
    yes, sorry, typo - I meant 31 December 2018
     
    Posted: Oct 1, 2019 By: SteLacca Member since: Jun 16, 2016
    #15
  16. Dubya

    Dubya UKBF Newcomer Free Member

    14 1
    Thanks Kulture - I have completed the DS01. Just need to mail it off to HMRC VAT, HMRC CT and Companies House then sit back and wait for the fireworks. I hope I am such small fry that it will just blow over. I was very ill when I was a young man and dealing with HMRC is like waiting for your test results : (
     
    Posted: Oct 1, 2019 By: Dubya Member since: Sep 30, 2019
    #16
  17. Dubya

    Dubya UKBF Newcomer Free Member

    14 1
    Regarding my DLA I have seen this in my 2018 accounts that we recently filed..
    Section 3. Directors’ benefits: advances, credit and guarantees
    Dubya
    Included in debtors is an amount payable to the company by one of its directors. The amount is an advance of £5,800 made to Dubya, a director of the company, on 02/01/2018.
    During the accounting year the maximum amount payable by Dubya was £7,800
    The following conditions are attached to the amount payable by Dubya:
    There is no interest due to be paid on any outstanding amount
    No fixed date has been set for the amount to be repaid to the company.
    Opening balance 01/01/2018 £2,275
    Additional advance ( £33,753 )
    Amount repaid £25,678
    Amount written off £0
    Amounts waived £0
    Interest payable £0
    Closing balance 31/12/2018 ( £5,800 )

    This is all Swahili to me I'm afraid. When I look online at my accounting I don't see anything for 5800 on 02/01/2018 so I assume it's creative accountancy and over my head.

    On the statement of Financial Position it states 'Creditors: amounts falling due within one year ( 8,895 )'
    Net Assets 3225.

    You can see why I struggle to understand this, it's a different language : )
     
    Posted: Oct 1, 2019 By: Dubya Member since: Sep 30, 2019
    #17
  18. SteLacca

    SteLacca UKBF Ace Free Member

    1,703 347
    If your borrowing went over £10,000 in the year (which it looks like it did) then you have a benefit in kind in respect of the interest free loan, and the company has a liability to Class 1A National Insurance.

    Did your accountant prepare forms P11D/P11D(b) prior to 5 July 2019?
     
    Posted: Oct 2, 2019 By: SteLacca Member since: Jun 16, 2016
    #18
  19. Dubya

    Dubya UKBF Newcomer Free Member

    14 1
    Yes, P11D submitted 20th June 2019. It's all zero's by the look of it. ??
     
    Posted: Oct 2, 2019 By: Dubya Member since: Sep 30, 2019
    #19
  20. SteLacca

    SteLacca UKBF Ace Free Member

    1,703 347
    I wouldn't expect that. Where there is an overdrawn DLA that goes above £10,000 at any point in the tax year, then interest should be calculated at the official rate of interest on the whole loan for the whole year (even if it only exceeded £10,000 for a day). In your case, a daily calculation would probably be best. The official rate in Y/E 5 April 2019 was 2.5%.
     
    Posted: Oct 2, 2019 By: SteLacca Member since: Jun 16, 2016
    #20